Premium Is on Access, Selection

Aug 18, 2003  •  Post A Comment

James Dolan, 48-year-old CEO of Cablevision Systems Corp., does not grant a lot of interviews, even though his company is often in the news. However, last week, in his office suite at Madison Square Garden in New York City, Mr. Dolan discussed a wide range of subjects, and was extraordinarily candid. An edited transcript follows. The interview was conducted by TelevisionWeek contributor John Motavalli and Editor Alex Ben Block.
TelevisionWeek: Do you expect to own cable channels two or three years from now?
James Dolan: Chances are we will. Will that be our emphasis? Probably not. I don’t think the time for [cable] channels has passed, but there is a horizon for their future because of new technology. VOD is a part of it. Whenever you can get to the customer the product that they want when they want it and can have a wide selection of product, that is going to beat having [customers] wait for you. And basically, cable channels are appointment viewing. You have to make an appointment with the channel to be there at 9 o’clock to watch whatever is scheduled. Now, TiVo is a product that has proven that concept may (be obsolete). That is why it is going so well–it sets the viewer free. We have them at home and we record “X-Files,” “Law & Order” and “CSI” during regular season. And I get to see every episode. That technology is there.
TVWeek: Do you mean that preprogrammed channels will not be as big a business going forward, that people will want more of a menu approach to individual shows?
Mr. Dolan: Over a horizon of time, maybe not this year, maybe not next year, maybe not even the year after, but, ultimately, yes, I believe that the customer will be drawn much more to programming in which they get to decide when to watch it and what they want to watch. I would use the example of McDonald’s. Why does McDonald’s have successful franchises? It sure as hell isn’t because they make the best hamburger. I think it’s because you can go in and get one quick, and it was decent, but it wasn’t as good as the one you could get down at the diner that had more meat in it and a better bun. But it takes you a half-hour to get that one. And our society puts a big premium on access and on selection. You won’t see a switch pulled overnight.
TVWeek: You grew up in the cable industry in the 1970s, after your father, Chuck Dolan, founded the company. Did you expect you would end up in it?
Mr. Dolan: I certainly didn’t think when I was 18 years old that I would be going into my father’s business, but by the time I was 22, I was ready. I had the opportunity in front of me, and it was just the best opportunity, and I guess I am glad I did.
TVWeek: Understandable, given that the Dolan family’s net worth is now in the billions. [Oppenheimer & Co. estimates the breakup value of Cablevision at about $15 billion. The Dolan family owns more than 30 percent of the stock and controls 75 percent of the voting shares.]
Mr. Dolan: The family’s net worth may exceed a billion, but I’m not sure. I don’t pay a lot of attention to that. What the family is fixated on is how the company is doing, as the majority shareholder with a controlling interest in the company. How the company goes is sort of how the family goes. Dad was brought up in the Midwest with a very working-class ethic. Work always came first. That ethic has been instilled in the rest of the family.
TVWeek: Certainly ambition has, given your current plans for Rainbow DBS. You haven’t said a lot about this.
Mr. Dolan: Probably not going to either. It doesn’t bother me if people in the industry are questioning it. We want to see the project go well. What is going to make a difference is how the customers perceive the product that gets put out over the satellite.
TVWeek: Are you going to be a direct competitor to EchoStar and DirecTV?
Mr. Dolan: Not necessarily. We haven’t said that. The capital investment is in a technology that is the best technology that is out there, and it is capable of doing a lot.
TVWeek: A lot of people are making a connection between the start-up of Rainbow DBS and your apparent readiness to sell your cable systems if the price is right.
Mr. Dolan: The philosophy that Dad has had has always been that people don’t buy cable, they buy programming. It happens that the best way of receiving [programming] is cable. Now, that’s changed a bit with things like [cable] modems.
TVWeek: There is a perception in light of your willingness to do the Vivendi deal [in which Rainbow channels would be put into a consortium joining Edgar Bronfman Jr.’s bid for VUE] that you would be willing to sell your programming channels. What you are saying now is that you feel you would be ahead of the curve if you did that.
Mr. Dolan: I think right now that content is at a low in terms of the valuation it’s given, but that is going to change. I think that cable is on its way up in terms of its value. Most people agree that perception of value for cable systems is increasing.
TVWeek: So that might also increase the possibility of your combining your cable systems with Time Warner or Comcast.
Mr. Dolan: To have one cable system for New York is sort of a dream idea; I agree with that, but it isn’t something that’s worked out. Time Warner is on its own time line and we’re on ours, and I would like to see us further develop our cable systems so we are closer to the top of the value curve than we are now.
TVWeek: It’s been alleged recently that your joint bid for VUE might have narrowed down to an interest, on the part of your company and that of Edgar Bronfman Jr., in just the music part of Vivendi.
Mr. Dolan: We were originally interested in all the Vivendi U.S. assets that included music. Sure, we’re still interested in music, but right now we’re following the lead of the Vivendi folks in France, and at the moment, that’s not on the table. I have nothing but the utmost respect for the Vivendi management team and that’s all you will hear from me. [Jean-Rene] Fourtou [head of Vivendi Universal] is a good guy. I think he understands business. Does he understand the intricacies of media? As much as he needs to, given the position that he’s in. The group we are involved in, involving Edgar Bronfman, private equity and Cablevision, has the resources to fund its bid. But the real question is what the bid is. We have not yet settled between ourselves on a concrete number. Whatever we decide we will be able to fund; that’s not an issue.
TVWeek: Some might think that the cable industry isn’t as much fun as it was in the ’80s, say, and this might be a good time to cash out.
Mr. Dolan: It’s just not as much fun as it used to be. The whole bursting of the Internet bubble and then the subsequent issues of companies like Enron and Adelphia have put a very sobering light on doing business, and our industry for sure has changed because there used to be a lot of independent operators and now there are hardly any. But if you go and cash in all your chips and go home, some might find that relaxing, but you would miss the challenge, the ability to accomplish.
TVWeek: A year ago, almost to the day of this interview, with your stock at $4, you announced you would cut 7 percent of your work force, get rid of Clearview Cinemas and The Wiz and retrench. That must have been painful, since you believed in the concept of marrying cable with retail. Wasn’t that your strategy?
Mr. Dolan: I believed in it, but the environment wasn’t one that would allow us to stick with the project. It was just too costly. The idea that consumers would pick up a piece of electronics and then are able to take it home and make it work fits in perfectly with self-install. [Cablevision’s Optimum Online cable modems are installed by customers themselves.] And it changes the relationship that the customer has with the cable operator. I felt we needed to do that, not only because I felt we could get to the market quickly by using that tactic, but also because when we first started out to roll out the high-speed product, we spent about an hour setting everything up, and that was too labor-inten
sive, and the relationship was that the operator was responsible for whatever happened to the customer’s computer, and the computer is too technical an instrument for us to be responsible for everything that happened with it. Self-install gave the customer control.
TVWeek: Analysts say The Wiz and Clearview Cinemas together lost $600 million for Cablevision.
Mr. Dolan: I don’t think so. I think The Wiz number is probably closer to $200 or $250 million. Still, it is not anything that you would be very happy with.
TVWeek: Considering the two acquisitions didn’t work out, The Wiz and Clearview, what might happen in the next year, what liquidity event, that could move the stock up again?
Mr. Dolan: The stock price is a reflection of how the markets perceive the economy, and that is affected by the economy and how the rest of the industry is doing. When I look at the company, I look at what the events are that will be adding value to the company, and to me, the one that I see as the most important in the next year is telephone, IP telephony, because that is a new product that is going to do very well in the marketplace, cement our customers and make us more resistant to competition from satellite. With a liquidity event, you didn’t really create any value, you just got value recognized. If we were, for instance, to sell AMC, that isn’t creating value.
TVWeek: Some who criticize your company say it is hard to know where the public part ends and the private part begins. There are the two Gulfstream jets the company owns and you use. There are production entities owned by the Dolan family that sell programming to Cablevision. There are Bell helicopters that your brother has leased to News 12.
Mr. Dolan: There is a lack of understanding about this. The company was founded by my dad. It is family-controlled. We are the largest shareholders, and it is a family enterprise. The Dolan family name and Cablevision are almost synonymous, and that’s true also in how we lead our lives. We’re wrapped around the company. Our calendars coincide with cable calendars. It’s always been that way since I was a kid. Is the family deeply involved with the company? Yeah. I would hope that our shareholders see that as a big positive. The family is very careful about how this is all accounted for. We were always very careful about that. In every company that is family-owned, the criticism is always, `Are you using the company for your own personal benefit? Are you benefiting more than your share of what you own?’ That comes with the territory with any company that is family-controlled. I would say that if Enron were family-controlled, you wouldn’t have that problem. We’re watching out for our stock position just like we’re watching for everyone else’s. They are married inextricably together. The wealth of the family rides on that stock and the company, so we’re not going to screw around. We’re not in it for a fast buck, we’re about building value for our customers–and trying to do it operationally rather than transactionally.
TVWeek: So you reimburse the company for all your travel on the company planes?
Mr. Dolan: Yeah. I cover the company on all its out-of-pocket expenses, and there is some part of it that is capital too. The G-5 [jet] is owned by the company. The G-4 is leased by the family.
TVWeek: Your critics wonder why you need two expensive company planes [$40 million each] when your assets are concentrated in the New York area.
Mr. Dolan: If you go back to the New York strategy, the company used to be active in 19 states at one time, and we consolidated and traded down to the New York market. We did that because at the time, the industry was focused on size, there was a lot of consolidation and our focus was to stay independent. Our strategy was to concentrate it all down into the No. 1 market. But it essentially is a national strategy. You can’t be a full national programming network unless you have an outlet in New York. So in that way we get to play on a national basis, and the satellite also does that for us. We have offices for AMC, IFC. We have programming entities. We relate to the whole Hollywood community in fairly strong fashion. We manage Fox Sports Bay Area.
TVWeek: How do you and your father divide responsibilities?
Mr. Dolan: Well, every morning [do] we get up and say, `What should we do? I’ll take this and you take that.’ No, Dad as the chairman is responsible for setting up the overall direction of the company.
TVWeek: Who decides about acquisitions?
Mr. Dolan: That’s Dad. That’s always Dad. I am the dutiful son. I will say he does listen to me. I provide the leadership for the company, for the employees, the executives. We have a lot of operating divisions and at any one time I will be focusing on one more intently than another. At any one time I am responsible for the operational health and the execution of the strategy. But it is Dad who sets the strategy and he is the culture of the company. That emanates from him.
TVWeek: What sort of parallel would you draw with Comcast’s Brian Roberts, who also inherited his father’s company? There aren’t that many other family-run companies in the business.
Mr. Dolan: That’s true, but I think Brian is a little ahead of me on that curve. Brian’s dad has taken more of a back seat, while Dad and I are still somewhat back of the curve on that one.
TVWeek: What about your father’s retirement? He is 76.
Mr. Dolan: Don’t suggest it to him. No, I don’t think he will ever retire. He doesn’t need to. He still enjoys it. His participation may in a way slow down, but at the moment it doesn’t look like that.
TVWeek: In May 2001, at a benefit tribute to you for Cable Positive, you talked about your addictions, and you put it in the present tense.
Mr. Dolan: When you are alcoholic and chemically dependent, if you ever get to the point where you’re think you are not, you are in trouble. That’s why the `One day at a time’ slogan is out there. You have to use the present tense. Sobriety is not something you ever take for granted. There is an expression in AA that no one ever gets killed by the caboose when you get run over by a train; it’s always the first drink [that kills you]. It’s not the same challenge that it was the first year I was sober, but you still confront your disease. [He notes that two days from the day of our interview is the 10th anniversary of his sobriety.] But it’s also the anniversary of another change in my life, and that’s my honesty. When you’re deadly honest, you have nothing to hide, but also you have nothing to remember, which is good in a way. I made a commitment 10 years ago that whether people liked me or didn’t like me, I had to be true to myself. That meant if people liked me, fine, if not, OK, but at least what you are getting is real. And that doesn’t jibe with drinking or taking drugs.
TVWeek: Often an addictive personality could manifest itself in other ways–hobbies or gambling or something else. Are there other things you’ve become obsessed with?
Mr. Dolan: My children. I’m obsessed with my children. [Mr. Dolan has five children from a previous marriage, including one who was his wife’s from a previous marriage.] The oldest is 16 and the youngest is 9.
TVWeek: Do you still do the July 4 party with the fireworks? Is it yours or a company party?
Mr. Dolan: That’s our [the Dolan family’s] party. It’s moved all the way from the biggest party we had, in 2000. That was the millennium and my parents’ 50th wedding anniversary. They were married on July 4, and my sister was born on July 4. That was the last big one, and they have scaled down. This last one we had was fairly modest in comparison.
TVWeek: Another family-owned cable company, Adelphia, has had a big financial scandal involving excessive spending. Is that one reason why you are cutting back on some things?
Mr. Dolan: I think the final Adelphia story is yet to be told. I don’t want to pass judgment on the Rigas family. I have known them for a long time, and all my contacts with them have been positive. I have never known them to be dishonest,
with me, my family or with the company. And that doesn’t mean those allegations are not true. I just don’t know that they’re not true.
TVWeek: Some New York sportswriters like to call you names because of your involvement in the Knicks and Rangers, who aren’t exactly hot teams at the moment. Does that hurt and do you care?
Mr. Dolan: No, that will make the victories that much sweeter. I have a team of managers in there and I have a lot of confidence in them. My primary role with these guys is support and to provide an environment for them to work in. In other words, do we have enough money to spend on this and does this make sense for the corporation? What can we afford to do and what can’t we afford? My job as chairman of the Garden is to keep continuity with them, to provide an environment where those guys can make logical, clear-headed, not beer-based decisions. And in this market, it’s easy to make a beer-based decision. All you have to do is read the papers and think, `I can’t do that trade because the papers will kill me.’ You eventually figure out that no matter what you do, the papers will kill you.
TVWeek: Do you see a resolution of the YES matter now?
Mr. Dolan: We are in mediation right now, and it is certainly possible. The best chance of our reaching a mediated long-term solution is if everyone involved stays real quiet. But customer choice in this category is very important to us.
TVWeek: Can you and Leo Hindery [CEO of the YES Network and a former Cablevision board member] ever be friends again?
Mr. Dolan: No.
TVWeek: Anyone who knows you has to deal with the musical side. When did you get into playing guitar?
Mr. Dolan: I started playing when I was a teenager and actually majored in music my first year in college, and then switched over to business and communications. I have always loved music and for a long time I was a sailor, and that was my other thing, but I essentially retired from sailing and replaced it with music. [He mentions his band, J.D. & the Straight Shot.] Our next gig is at the China Club.
TVWeek: You owned a couple of 100-foot Maxi Yachts, correct?
Mr. Dolan: Yeah, I used to have a Maxi Yacht. The Knickerbocker was the family boat. My boat was called the Sagamore [named after Theodore Roosevelt’s home, which is near Mr. Dolan’s home in Oyster Bay, Long Island]. For a while, I was racing quite a bit. I spent most of my free time at it, five weeks out of the year, actively competing and practicing in between. Having a Maxi campaign is a pretty complicated deal, involving everything from 16 to 24 guys, carting them all over the place, and competing against the likes of [Oracle founder Larry] Ellison. I just got too old for it.
TVWeek: It’s quite rare for you to give an interview like this. Why is that?
Mr. Dolan: Because it’s not really about me, it’s about the company. A question that a friend of mine asks me about once a year is, `Are you enjoying it?’ and, `What do you like most about it?’ And the thing I like best is working with all the executives around me and getting to know people down the line and out in the field. And I like that, and it’s really about them. As you get to know those guys and the commitment they have and how much they enjoy working for the company, and that is part of what I do, to put them into a position where they can do their jobs. That to me is part of what a CEO does, to inspire confidence and recognize the needs of the talent around you, and to help them feel good about what they are doing. That is the fun part of the job for me. I don’t shoot any baskets and I don’t shoot any goals, but in my own way I will feel part of it, but it will be their victory. Other CEOs work in other ways. I think it works, but I guess the jury’s still out.